A messy but practical strategy for phasing out the U.S. coal fleet

By 2030, we have to stop emitting greenhouse gases from coal. That conclusion is most famously associated with NASA’s climate chief James Hansen, but Hansen is not alone. In a recent paper, nine other climate scientists — David Beerling, Robert Berner, Pushker Kharecha, Valerie Masson-Delmotte, Mark Paganini, Maureen Raymo, Dana Royer, Makiko Sato, and James Zachos — joined Hansen in identifying a 2030 phase-out as the “sine qua non” for avoiding dangerous climate change. The scientists concluded:

Decision-makers do not appreciate the gravity of the situation … Continued growth of greenhouse gas emissions, for just another decade, practically eliminates the possibility of near-term return of atmospheric composition beneath the tipping level for catastrophic effects. The most difficult task, phase-out over the next 20-25 years of coal use that does not capture CO2, is Herculean, yet feasible when compared with the efforts that went into World War II. The stakes, for all life on the planet, surpass those of any previous crisis.

So what’s the best way to accomplish the phase-out of coal? That question, with its use of the singular “way,” may be wrongly phrased. One mistake that activists tend to make is “marrying” a particular solution to a problem. Not only does this result in unnecessary infighting, as factions line up behind their favorite options, it also ignores the reality that changing the world is always a messy endeavor, and tactics often work better in combination than in isolation.

In researching my book Climate Hope: On the Front Lines of the Fight Against Coal, I investigated why investor Warren Buffett decided to cancel six new coal plants that his company PacifiCorp was planning to build as recently as 2007. The answer turned out to be surprisingly complicated, involving no less than 10 different causal factors working in combination, including direct action protests, petition drives, renewable portfolio standards, rising construction costs, competition from wind power, lawsuits, the prospect of climate legislation, and more.

Across the country, the Buffett story has been repeated again and again, as underdog grassroots activists in state after state have taken on and defeated Big Coal and King Kilowatt. As of late February, activists had derailed 97 of the 151 new plants that were in the pipeline in May 2007. Since 2001, according to the Sierra Club, 126 coal plants have been stopped. In 2009, not a single new coal plant broke ground. All this was accomplished even though the U.S. still lacks any sort of comprehensive climate policy. Rather than one overarching tactic or policy, the rush to build new coal plants was stopped by a broad, feisty movement that inflicted a “death of a thousand cuts.”

Taking on the existing coal fleet

Now the movement against coal is shifting its focus from blocking new plants to the second and harder part of the task: phasing out the fleet of existing coal plants. In the Pacific Northwest, the Sierra Club and others have targeted TransAlta’s Centralia plant. In the Southwest, Natural Capitalism Solutions this week released a major economic study showing the economic benefits of shutting down the Navajo Generating Station. Across the country, utilities including Xcel, Portland General Electric, Red Hawk Energy, Georgia Power, Progress Energy, Public Service Company of New Hampshire, DTE Energy, FirstEnergy, NRG Energy, and Exelon have recently announced coal plant retirements or conversions, and TVA may soon join the list. The 2030 deadline is a daunting challenge but not an unrealistic one, since the coal fleet is the most antiquated part of America’s energy infrastructure and alternatives abound. The median plant was built in 1966, making it older than most activists. Scores of plants pre-date the Korean War. Almost 90 percent of existing coal-fired generating capacity dates from before 1985, which means that if we simply instituted a policy of retiring coal plants at age 40, we’d be 90 percent of the way to the zero-coal goal by 2025.

On the CoalSwarm wiki, traffic stats shows that climate change activists are becoming more and more familiar with the details of the coal fleet. Of the 3,200 pages on the site, the most frequently visited is “Existing U.S. Coal Plants,” which receives hundreds of page views every day and links to individual pages on 679 separate coal plants (1,445 coal-fired generators), including plants located on at least 65 college campuses. Each wiki page contains basic data, links to mines and waste sites, and Google satellite imagery of a plant and its surrounding area. At least 126 coal plants are located in the midst of residential areas (i.e. with more than 10,000 people in a 3-mile radius), directly contradicting the image of coal plants operating in isolated rural locations. These plants tend to be of older vintage, and only 32 of them have sulfur scrubbers. The per capita income in these high-impact communities is 14 percent below the national average; 44 percent of the residents are persons of color. Apart from the climate benefits, phasing out these plants will have major health benefits for 6.1 million people who live within three miles of one of the plants, as well as the tens of millions of other people affected by coal emissions.

In a groundbreaking 2004 study, the Clean Air Task Force put the annual health toll from power plant particulates at 23,600 premature deaths (14 years lost per fatality), 38,200 nonfatal heart attacks, and 554,000 asthma attacks. That’s nearly 35 premature deaths for each plant, a heavy price to pay for the 54 jobs provided by the typical facility. It’s no wonder that studies of the “external costs” of coal-fired power (i.e. the burden borne by society) invariably produce startling results. An October report released by the Natural Research Council placed the annual costs due to three types of pollutants from coal (not including mercury emissions or climate change impacts) at $62 billion annually, or about 3.2 cents per kilowatt hour generated by coal.

Throughout the 1990s, the size of the coal fleet remained fairly stagnant at about 330 GW of capacity (nameplate), with few plants built and few retired. During the past decade, that stagnation continued, with retirements roughly equaling new plant construction. From 2000 through 2009, about 8 GW of new coalplant capacity came online. Meanwhile, from 2000 through 2007, 132 coal-fired generating units were retired or converted to other fuels. Most of these were small, aging plants. The total amount of capacity retired or converted to other fuels from 2000 to 2007 was about 7 GW of capacity.

In its most recent survey, the Energy Information Agency lists 54 generating units totaling about 4 GW of capacity as scheduled for retirement or conversion in the period 2008 to 2014. News sources report an additional 27 units totaling about 6 GW as scheduled or under study for retirement or conversion to other fuels, mainly biomass and natural gas. New additions are expected to exceed retirements and conversions, with about 17 GW of new coal-fired generation capacity under construction, near construction, or permitted, according to the latest NETL report.

To summarize: during the entire period from 2000 to 2014, about 17 GW of capacity is expected to be removed from the coal fleet and 25 GW of capacity is expected to be added, for a net increase of 8 GW. While that may sound sizeable, it amounts to only a 2 to 3 percent increase in coal capacity during the entire 15-year period. Overall, the fleet continues to age, and by 2016 over half the coal plants in the U.S. will be more than 50 years old.

Coal’s share of the overall electricity mix has been on the decline since 1987, when it hit an all-time high of 57 percent. In 2004, coal’s share dropped below 50 percent for the first time in four decades. In the most recently reported 12-month period (December 2008 – November 2009), coal’s share in U.S. electricity generation dropped to 45 percent. The decline in coal is mostly due to an increase in the share of electricity generated by natural gas, especially in the Southeast, where coal prices are relatively high and natural gas prices are relatively low. Going forward the 35 GW in new wind power capacity that has come online since 2000 (including over 18 GW in 2008 and 2009 alone) will further cut into coal’s share of the electricity mix.

Scenarios such as Google’s Clean Energy 2030 plan, the Union of Concerned Scientists’ Climate 2030 study, and Scientific American’s Solar Grand Plan show that it is feasible to replace coal with cleaner alternatives by 2030. What’s missing from such studies is the specific policies to drive the transition. Merely having sufficient alternatives isn’t enough. The reason is simple: amortized coal plants are cheap to run, and generally they can stay in operation almost indefinitely. It’s a fantasy to think that power companies will shut down existing coal plants and replace them with alternatives, unless they are compelled to do so or unless the current economic advantages of legacy plants change radically. (Note: For an example of innovative thinking on making the economics work, see the newly released report “Coal Plants in Transition: An Economic Case Study” [PDF].)

Frontal assault or death of a thousand cuts?

So how do you get rid of a bunch of old coal plants? For that matter, how do you get rid of any chunk of old infrastructure that is standing in the way of progress? If it weren’t for the vested interests at stake, the answer would be simple: a scheduled phase-out administered by federal regulators. Legislatively, this could probably be accomplished with a simple five-page bill that authorized the EPA to create and implement a phase-out schedule for the legacy coal fleet. The phase-out of CFCs and related compounds provides an analog. After scientists discovered the Antarctic ozone hole in 1985, 24 countries agreed on the Montreal Protocol in 1987 to phase out their use of CFCs. When subsequent research showed the situation to be worse than previously thought, the pace of the phase-out was accelerated. In the United States, production of CFCs and most other ozone-harming compounds was ended on Jan. 1, 1996.

Note what wasn’t done. Though some excise taxes were imposed on ozone-depleting compounds, market signals were not relied on. With the planet itself at stake, policy makers saw the need for a more decisive approach: a scheduled phase-out.

Outside the world of environmental policy, an example of a staged phase-out of key infrastructure can be found in the Base Realignment and Closure Program (BRAC), which successfully shuttered over 350 military installations between 1989 and 1995. BRAC created mechanisms for depoliticizing the process, for aiding the economies of impacted communities, and for managing workforce transitions.

Recently, T. Boone Pickens and Ted Turner proposed a “cash for clunkers” plan that would pay utilities, plant by plant, for shutting down old coal facilities, starting with the “oldest, least efficient and most polluting.” The beauty of the plan is that it would aim directly at the legacy fleet and, if the “cash” side of the proposition were attractive enough, might elicit the willing participation of utilities. Moreover, given that the existing coal fleet is responsible for over 34 percent of U.S. carbon dioxide emissions, a “cash for clunkers” program could provide a straightforward way for the U.S. to meet the promises made at Copenhagen.

Is such a sensible solution likely? Realistically, a coordinated phase-out of coal is not in the cards, at least within the next few years. Instead, what’s likely to happen is a “death of a thousand cuts” attack on the coal fleet via a swarm of activist pressure points and institutional policy measures. It’s a messy solution, but what makes it promising is the fact that most of the coal fleet is already well into middle age. Like the rusting car that falls apart one fender, one muffler, one tail light at a time, the idea is to make each coal clunker more trouble than it’s worth, so that the operator eventually throws in the towel.

Nine “knives” that could pare down the coal fleet

Here, then, is a list of measures — some existing, some proposed — that could play a role in whittling down the coal fleet. None of these measures, considered in isolation, will have an overwhelming impact; what’s important is their ability to work in concert together.

Knife #1: Efficiency measures. The numbers are staggering: about 40 percent of U.S. electricity consumption is pure waste that could be eliminated via tighter building and appliance standards, sensible retrofits, etc. Since 45 percent of electricity generation comes from coal, efficiency alone could largely do the job of displacing the coal fleet. In reality, it won’t be that simple, because the complicated logic of utility “dispatch order” may favor displacing natural gas instead. Nevertheless, weakening demand is the necessary condition that makes other efforts to diminish the coal fleet possible, and it’s far and away the cheapest.

Knife #2: Direct actions and other protests. Protest makes people uncomfortable. Mainstream environmentalists often fret that it alienates “regular people.” But the fact of the matter, as documented by sociologist Jon Agnone, is that protest produces results, though nobody knows exactly how or why. Think of it as “movement caffeine”: a way of defining a moral edge, of underlining the urgency of what’s at stake. Taken in isolation, protests against power plants will not cause those power plants to be shut down. But urgent, repeated, dramatic protest aimed at utilities, mines, railroads, ports, banks, regulators, elected officials, and the media are indeed essential within the overall mix of tactics. Note too that a mere two dozen executives control 70 percent of the coal-fired generating capacity in the U.S. So far, these “old white guys” haven’t been the direct target of much campaigning or pressure. That could change in the future.

Knife #3: Renewable portfolio standards. At least 33 states accounting for 73 percent of U.S. electrical generating capacity have renewable portfolio standards, with goals ranging from 8 percent by 2020 in Pennsylvania to 40 percent by 2017 in Maine. Including the states that have no standards, the weighted average of all these programs amounts to a requirement that 13 percent of all generating capacity be from renewable sources at by around 2020. Assuming that efficiency improvements keep overall demand growth to a minimum, renewable portfolio standards currently in effect will result in as much as 72 GW of renewable capacity and will undoubtedly serve to inhibit the building of new coal capacity. In fact, some companies (e.g. PacifiCorp, Tampa Electric, Sunflower Electric) have already cited the effect of renewable portfolio standards in canceling new coal plants. As with efficiency improvements, the effect on the existing coal fleet depends to some extent on the relative fuel costs of natural gas versus coal, which have experienced rapid shifts in both directions over the past two years. Significantly, renewable portfolio standards are backed by increasingly effective lobbying groups like the RES Alliance for Jobs, which includes wind, biofuels, and geothermal companies. A recent study for the RES Alliance by Navigant Consulting looked at the effect of a nationwide renewable portfolio standard of 25 percent in the year 2025. According to the study, a 25 percent RPS would displace 2,000 GWh of electricity, a figure equal to the entire yearly output of the current coal fleet. There are serious problems with renewable portfolio standards: biofuels plants, for example, are often worse polluters than coal plants. Nevertheless, state and federal renewable portfolio standards may be the most effective single item in the toolkit for phasing out coal.

Knife #4: Criteria pollutant regulation. As regulation under the Clean Air Act of “criteria pollutants” such as sulfur dioxide, nitrous oxides, ozone, mercury, and particulates continues to tighten, utility planners and state regulators have to choose between authorizing hundreds of millions of dollars in pollution control retrofits, or shutting down aging plants and investing in clean technologies. For example, in 2008 the EPA released a list of scrubber retrofits expected at 56 coal-fired generating units in 2010 and 20 coal-fired generating units in 2011. Since scrubbers actually increase carbon dioxide emissions, many climate activists are regrouping around a position of “don’t retrofit: shut it down.” So far, that position has not been able to slow the momentum of retrofits. Last year’s showdown in New Hampshire over the future of the 459 MW Merrimack Station highlighted the charged politics of the issue. When the price tag for a scrubber retrofit for the plant jumped from $250 million to $457 million, the ad hoc business coalition 21st Century New Hampshire, along with groups such as the Sierra Club, pressed the state to consider shutting the station down rather than undertaking the retrofit. That effort was defeated by a combination of power company and union lobbying; consequently, Merrimack Station, which consists of a 42-year-old unit and a 50-year-old unit, is now likely to run for several more decades. Meanwhile, in a similar fight in Oregon, a plan to retrofit the 601 MW Boardman Plant was defeated in favor of a smaller retrofit and a shut-down by 2020, though activists continue to push for an earlier date. Look for the retrofits-versus-shutdown issue to be a major preoccupation for groups like the Sierra Club during the coming decade. Since less than a third of coal-fired generating capacity (101 GW out of 329 GW in 2005) currently is equipped with sulfur scrubbers, even a partial victory for the “don’t retrofit: shut it down” side of the issue could carve a big chunk out of the existing coal fleet.

Knife #5: Coal waste regulation. The problem of unregulated coal waste at over 1,300 surface impoundments entered the national consciousness in the the wake of the Tennessee mega-spill of December 2008. In January 2009, an AP study found that 156 coal-fired power plants store ash in surface ponds similar to one that ruptured at Kingston Fossil Plant. Currently, groups like Earthjustice are pushing hard for coal waste to be designated a hazardous pollutant. On Dec. 10, 2009, Ken Ladwig of the Electric Power Research Institute told Congress that tighter regulation of coal combustion by-products could result in the closure of 190 to 411 older coal-fired generating units totaling 40 GW to 97 GW. Even if Ladwig is grandstanding, there’s no question that fixing defective waste disposal systems at aging coal plants will be expensive. When added to other costs such as scrubber retrofits (see above) and rising coal costs (see below), the waste issue — and the liability risks that go along with it — may be one headache too many for a lot of harried utility executives.

Knife #6: Holding industry to its “clean coal” promises. Rather than getting rid of coal plants, let’s simply retrofit plants for carbon capture and storage (CCS) — that’s the message that groups like American Coalition for Clean Coal Electricity have spent tens of millions of dollars selling. So why not force utilities to live up to the rhetoric? One approach to turning clean coal rhetoric into reality has been proposed by soon-to-depart Sierra Club chief Carl Pope, who proposes that new plants meet strict carbon emissions standards and that existing coal plants be required to meet the same emissions standards once they reach the age of 50 — or else be retired. Do regulators have the nerve to require such a standard? In three states, Washington, Maine, and California, the standard already exists, prohibiting utilities from entering into electricity contracts for power from coal plants whose emissions exceed 1,100 pounds of carbon dioxide per megawatt hour, a level that cannot be met by coal plants that lack carbon capture. Note that California’s carbon standards apply to existing plants when they receive capital upgrades, and Washington’s standard applies to both new and renewed contracts for electricity. Under the Bush administration, the EPA in July 2008 outlined an approach that would require merely marginal improvements at existing plants, such as enhancements to boiler efficiency. But what if the EPA developed a more serious standard? For example, if EPA were to apply the 1,100-pounds-of-CO2-per-megawatt-hour standard to existing plants, what would the effect be on the coal fleet? The answer is that most plants would have to be phased out. Although researchers continue to investigate the CCS retrofit option, there are some practical obstacles that stand in the way of retrofitting most existing coal plants. First, because carbon capture requires large amounts of energy, it imposes a heavy parasitic power burden on an existing plant. To be able to shoulder this burden and still have a reasonable amount of power left over, eligible plants need to be those that employ the more efficient supercritical technology rather than the less efficient subcritical technology. Currently, about 80 GW of the coal fleet employs supercritical technology. A second criterion is that candidate plants be no older than 20 or 25 years, so that enough lifetime remains for expensive CCS retrofits to be worthwhile. That’s a serious obstacle, since most supercritical plants in the United States were built between 1965 and 1980 and therefore are already 30 to 45 years old. Only a handful of existing plants meet both criteria: supercritical technology and recent vintage. As if those two obstacles weren’t enough, there are others, including availability of water, sufficient vacant space to build the CCS facilities, and proximity to geological formations suitable for carbon sequestration. The upshot is that any CCS retrofits that may be mandated (e.g. by greenhouse gas regulations) could not be economically undertaken by utilities. In effect, holding utilities to the promise of “clean coal” amounts to a de facto shutdown requirement, at least for the vast majority of existing plants.

Knife #7: Squeezing coal supplies. In 2007, the National Research Council released a report challenging the common assertion that the United States has a 250-year supply of coal. The NRC study suggested that 100 years was a more reasonable estimate. Despite the downgrade, supplies of coal appear to be adequate on a general basis. Nevertheless, in some regions, especially the Southeast, coal supplies may become a factor. Also, close examination of Wyoming’s Power River Basin by the U.S. Geological Survey suggests that future coal supplies from that key region, which accounts for about 40 percent of U.S. production, are more constrained than commonly assumed. Meanwhile, the EIA reports that production in both the Interior and Appalachian regions is declining. As resistance to mountaintop-removal mining practices continues to intensify, that decline will only steepen. By themselves, coal supply issues are unlikely to shutter any existing plants; however, higher coal prices will augment the effectiveness of other shut-down measures, especially if they alter the “dispatch order” such that gas-fired generation moves ahead of coal-fired generation. In fact, a recent report by the EIA concludes that rising coal prices and falling natural gas prices have already caused a shift in generation patterns in the South and to a lesser extent along the South Atlantic states.

Knife #8: Carbon taxes. Carbon taxes are likely to be a much more effective measure for stopping new coal plants than for phasing out existing ones. Since new coal plants are expensive, even a modest tax on carbon dioxide would serve to tip the balance toward competing generation options such as wind. But for existing plants, a study for the American Public Power Association shows that carbon taxes of less than about $50 per ton of carbon dioxide won’t do the trick. Under $50 per ton, it will still be more economical for utilities to simply pay the tax and continue running existing coal plants than to dispatch sequestering-coal or natural-gas units. It’s not until the tax reaches $80 per ton that production from existing coal plants finally takes a nose dive, falling by 85 percent in 2030. Still, that doesn’t mean carbon taxes are meaningless in tackling the legacy coal fleet. Applying the principle that combinations of measures may work where individual measures fail, a smaller carbon tax could combine with other factors like expensive scrubber retrofits and expensive coal waste reengineering to drive more plants into the “not worth the hassle” column.

Knife #9: Cap-and-trade, cap-and-dividend. Even before the legislation was weakened in the summer of 2009, an EPA analysis of the Waxman-Markey climate bill (ACES) showed that the legislation would have only a minimal effect on the legacy coal fleet. According to the analysis, passage of Waxman-Markey would cause 22 GW of the existing coal fleet to be retired by 2015 (in addition to 5 GW predicted to be retired in the absence of the legislation). From 2015 through 2025, Waxman-Markey would force no further retirements. Waxman-Markey would also block EPA from regulating greenhouse gases, removing a potentially useful tool for closing coal plants. Another federal cap-and-trade bill, the Cantwell/Collins CLEAR Act, has been analyzed by World Resources Institute, but the analysis failed to provide any specific conclusions about the effect of the bill on the existing coal fleet. As for the three regional cap-and-trade programs currently under development (the Northeast’s RGGI, the Midwest’s MGGA, and the West’s WCI), only the RGGI has a track record of fees for carbon dioxide. At the current level of about $2 per ton, those fees are not sizeable enough to result in the closure of legacy coal plants. As with carbon taxes, cap-and-trade laws could tip the economics away from coal and might prove useful in combination with other measures. But that principle only applies if the cap-and-trade regulation does not preempt other measures — e.g. the preemption of EPA greenhouse gas regulation by ACES.

Conclusion

When added together, are the measures outlined above sufficient to phase out coal? Not yet. But the process is just beginning. As Bill Gates once observed, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” The anti-coal movement is still gaining strength, and it has an important ally in the renewables industry. Increasingly these companies, along with the tens of thousands of people they employ, will recognize that 40- and 50-year-old coal plants are blocking their growth, and they’ll add their weight to the pressure to retire more plants.

Assemble any group of anti-coal activists, and you’ll soon hear more and more ideas for ways to shut down dirty old coal plants. An important principle to guide this discussion is that in a messy war of attrition, a host of small measures can add up to victory. As Gandhi said, “Whatever you do will be insignificant, but it’s very important that you do it.”